Starboard Builds a Stake in MGM Resorts and Will Seek Changes

(Bloomberg) -- Starboard Value, the activist fund run by Jeff Smith, has built a position in MGM Resorts International and plans to push for changes at the Las Vegas-based casino owner.

The New York hedge fund has built a small position in the company over the last couple months, said the people, asking not to be identified because the matter is private. The size of Starboard’s position and the type of changes it’s seeking couldn’t be immediately learned.

Shares in MGM rose as much as 4.9 percent before settling up 2.3 percent to $28.25 at 10:57 a.m. in New York trading Thursday, giving the company a market value of about $14.9 billion. MGM shares have fallen 13 percent over the past 12 months.

Representatives for Starboard and MGM declined to comment.

MGM announced a cost-cutting drive this month to boost profits by $300 million annually, primarily over the next two years. Labor savings are projected to account for half of that increase, with the rest coming from improved sourcing of supplies and higher revenue.

The cuts haven’t been driven by pressure from shareholders, MGM Chief Executive Officer James Murren said in an interview this month, even though investors known for activism also hold stakes in MGM, including Corvex Management LP and Canyon Capital Advisors.

“We are in the last stages of an economic expansion,” Murren said. “It’s our job as managers to recognize that we’re deep in this economic cycle and we need to prepare for a slowdown, trade wars, volatility.”

The New York Post reported in September that Starboard had built a position in MGM. People familiar with the matter told Bloomberg News at the time, though, that the activist investor didn’t own shares and had no economic exposure to the stock. Starboard has built a stake since then, the people said Thursday.

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